Housing Starts Rise 2.8 Percent in February

March 20, 2002

Strongest Single-Family Starts in Over 20 Years

Indicating that the nation?s housing market will almost certainly be a positive contributor to economic growth in this year?s first quarter, the Commerce Department reported today that overall housing starts rose 2.8 percent in February to a seasonally adjusted annual rate of 1.77 million units. The gain was due entirely to the single-family sector, where starts rose 7.4 percent to a rate of 1.46 million units ? their fastest pace since December of 1978.

"These exceptionally strong numbers, combined with upwardly revised figures for January and December, are ample evidence that housing ? specifically residential fixed investment ? is helping pull the economy out of recession," said Gary Garczynski, president of the National Association of Home Builders (NAHB) and a builder/developer from Woodbridge, Va.
The Commerce Department revised its already strong report on January housing starts from an originally reported overall rate of 1.68 million units to an even stronger 1.72 million units. It also revised upward its report on December starts, from 1.58 million units to 1.6 million units.

The single-family segment of the market performed particularly well in February, reaching its fastest production pace in more than 20 years. Multifamily starts, which are typically more volatile, retreated 14.3 percent to an annual rate of 312,000 units, partially offsetting a substantial gain registered in January.

Starts rose in three out of four regions in February. The West reported the largest gain, of 14 percent, while the Midwest and South posted more moderate gains of 0.8 percent and 0.9 percent, respectively. The Northeast was the exception to the rule, with a 9.3 percent decline that followed a sizeable increase in January.

Building permits, which can be an indicator of future building activity, rose nearly 2 percent in February to a seasonally adjusted annual rate of 1.75 million units. Single-family permits rose 2.7 percent to a rate of 1.37 million units, while multifamily permits declined 1.3 percent to a rate of 381,000 units. Both were up from their fourth quarter 2001 averages. Regionally, permits rose in all but the Midwest in February.

Attributing housing?s exceptionally strong showing at the beginning of this year partly to unusually favorable weather conditions, Garczynski also credited the ongoing economic recovery, continuing low mortgage rates, reviving consumer confidence and strong house price appreciation. "The fact that the Fed has stopped easing monetary policy, and long-term rates have recently moved slightly upward, may also be stimulating housing demand -- at least in the short term -- as families seek to lock in historically low rates while they last," he noted.

While some slowing of housing production may occur in the second quarter as things settle down to a more sustainable, but strong, level, Garczynski said, NAHB is forecasting that total housing starts in 2002 will about equal 2001?s healthy pace of 1.6 million units.